Fitch Ratings expects to assign the following ratings and Rating Outlooks to Carlyle Global Market Strategies CLO 2014-3, Ltd./LLC:
Fitch does not expect to rate the class A-2, B, C-1, C-2, D-1, D-2, or E notes, or the subordinated notes.
Carlyle Global Market Strategies CLO 2014-3, Ltd. (the issuer) and Carlyle Global Market Strategies CLO 2014-3, LLC (the co-issuer) together comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by
KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 35.7% for class A-1A and A-1B (collectively, class A-1) notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in a 'AAAsf' stress scenario. The degree of CE available to class A-1 notes is lower than the average CE of recent CLO issuances; however, cash flow modeling indicates performance in line with other 'AAAsf' CLO notes.
'B/B-' Asset Quality: The average credit quality of the indicative portfolio is 'B/B-', which represents similar credit quality to recent CLOs. Issuers rated in the 'B' rating category denote a highly speculative credit quality; however, in Fitch Ratings' opinion, class A-1 notes are unlikely to be affected by the foreseeable level of defaults. Class A-1 notes are projected to be able to withstand default rates of up to 59.0%.
Strong Recovery Expectations: The indicative portfolio consists of 95.1% first lien senior secured loans. Approximately 88.8% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned recovery rating of 'RR2' or higher, resulting in a base case recovery assumption of 73.8%. In determining the class A-1 notes rating, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stress assumptions. The analysis of class A-1 notes assumed a 35.6% recovery rate in Fitch's 'AAAsf' scenario.
Fitch evaluated the structure's sensitivity to the potential variability of key model assumptions, including decreases in recovery rates and increases in default rates or correlation. Fitch expects the class A-1 notes to remain investment grade, even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'BBB+sf' and 'AAAsf' for the class A-1 notes.
The expected ratings are based on information provided to Fitch as of
Key Rating Drivers and Rating Sensitivities are further detailed in the accompanying presale report, available at 'www.fitchratings.com' or by clicking on the link.
Additional information is available at 'www.fitchratings.com'.
--'Global Structured Finance Rating Criteria' (
--'Global Rating Criteria for Corporate CDOs' (
--'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds' (
--'Counterparty Criteria for Structured Finance and Covered Bonds' (
Global Structured Finance Rating Criteria
Global Rating Criteria for Corporate CDOs
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds
Counterparty Criteria for Structured Finance and Covered Bonds
Source: Fitch Ratings
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